Employment Study: Minimum Wage Hike Means More Poverty

President Barack Obama and congressional Democrats are making a mistake in seeking a higher minimum wage, says Michael Saltsman, research director of the Employment Policies Institute.

“Both are united in their belief that a higher minimum wage can reduce poverty without reducing employment,” he writes in Politico. “They’re wrong on both counts.”

A Journal of Human Resources studies indicates increasing the minimum wage can move more people into poverty than out of it, Saltsman says.

“Here’s why: an increase in someone’s hourly wage won’t translate to an increase in their annual take-home pay if they lose hours or employment as a result,” he says. “That’s exactly what’s happening. Employers who keep just 2 cents to 3 cents in profit from each sales dollar (think: restaurants or grocery stores) can’t just absorb a 39 percent hike in labor costs.”

Saltsman says they either have to raise prices, or more likely, find a way to provide the same product with less service because many of their customers can’t afford to pay higher prices.

“This means fewer hours of work and fewer opportunities for less skilled groups like teens, who already face a 25 percent unemployment rate,” he writes.

“That’s why a new Employment Policies Institute analysis of Census Bureau data finds that roughly 988,000 jobs would be lost because of the Harkin/Miller [minimum wage] proposal [in Congress], with 30 percent of the lost jobs occurring in the retail industry and 29 percent occurring in accommodations and food service.”

The bill introduced by Iowa Sen. Tom Harkin and California Rep. George Miller would raise the minimum wage from the current $7.25 per hour to $10.10. per hour.